Currency and Inflation - Objective Type Questions with Answers | General Awareness on Economics

Questions
11 Out of the various ways of the financing government’s investment expenditure, which one of the following is a method of inflation control ?
A Foreign aid
B Deficit financing
C Taxation
D Public borrowing

Answer: Option [C]

The correct answer is Taxation. Taxation dampens demand. If the tax increases, an individuals expense increases as one is paying a higher proportion of your income to the government as tax. This reduces demand for goods and services. Supply cannot change immediately as firms produce on a large scale.

12 ‘Devaluation’ means :
A reduction in the value of a currency vis-a-vis major internationally traded currencies
B permitting the currency to seek its worth in the international market
C fixing the value of the currency in conjunction with the movement in the value of a basket of pre-determined currencies
D fixing the value of currency in multilateral consultation with the IMF, the World Bank and major trading partners

Answer: Option [A]

Devaluation means reduction in the value of a currency vis-a-vis major internationally traded currencies. Devaluation is the deliberate downward adjustment of the value of a country's money relative to another currency, group of currencies, or currency standard.

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13 What do you mean by convertibility of the rupee ?
A being able to convert rupee into us dollars
B freely permitting the conversion of rupee to other major currencies and vice versa
C allowing the value of rupee to be fixed by market forces
D developing a international market for currencies in india

Answer: Option [B]

The correct answer is freely permitting the conversion of rupee to other major currencies and vice versa. Convertibility is the ease with which a country's currency can be converted into gold or another currency through global exchanges.

14 Black money implies :
A counterfeit currency
B money earned from chit funds
C money earned through underhand deals
D income on which payment of tax is usually evaded

Answer: Option [D]

Black money implies income on which payment of tax is usually evaded. Black money includes all funds earned through illegal activity and otherwise legal income that is not recorded for tax purposes.

15 In the one decade, which one among the following sectors has attracted the highest Foreign Direct Investment inflows into India ?
A Chemicals other than fertilizers
B Services sector
C Food processing
D Telecommunication

Answer: Option [D]

The correct answer is Telecommunication. India is currently the world’s second-largest telecommunications market and has registered strong growth in the past decade and half. The percentage of FDI inflows in the telecommunication sector over total FDI fluctuated between 3.05% in 2005-2006 to 9.45% in 2014-15. Telecommunication has consistently received FDIs in subsectors.

16 When was decimal coinage introduced in India ?
A 15 August, 1947
B 26 January, 1952
C 1 April, 1957
D 31 December, 1963

Answer: Option [C]

The correct answer is 1 April, 1957. Indian coinage went decimal on April 1, 1957, ten years after it gained Independence from the British. Though coins as units of monetary value have been in use for 500 years or so, India's history of modern coinage is only about 200 years old.

17 USD/JPY, USD/EURO and USD/CAD are the currency pairs in terms of foreign exchange trading. Amongst them which one of the following is referred as the base currency for quotes ?
A USD
B JPY
C Euro
D CAD

Answer: Option [A]

The correct answer is USD.

  • USD is the base currency for quotes.
  • When we quote currencies, we are indicating how much of one currency it takes to buy another currency.
  • This quote requires two components: the base currency and the quoted currency.
18 Which of the following is/are treated as artificial currency ?
A ADR
B GDR
C SDR
D Both ADR and SDR

Answer: Option [C]

The correct answer is SDR. A substitute for an actual currency that is used in economic transactions. An example of an artificial currency is the special drawing rights (SDR) that were created by the International Monetary Fund (IMF). SDRs are used by the members of the IMF to pay their dues and transfer funds between countries.

19 In terms of economics, the small gap between the first recession and second recession is known as :
A Double Deflation
B Deflation
C Deep Recession
D Double Dip Recession

Answer: Option [C]

In terms of economics, the small gap between the first recession and second recession is known as Deep Recession.

20 Cheap Money implies :
A low rate of inerest
B low level of savings
C low level of income
D excess of bank money

Answer: Option [A]

The correct answer is low rate of inerest. Cheap money policy refers to a monetary policy by the central bank where the central bank sets low interest rates so that credit is easily available to the general public in order to bring efficiency in trade and commerce in an economy. Such a policy is used by the government at the time of deflation or recession in the economy.

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